Are Low Rental Sales Signaling the End of the Auto Boom?

After plunging during the financial crisis, sales of automobiles had been accelerating right up into December 2016. Since then they’ve tailed off. And now news of userd car prices coming down and rental firms buying fewer new cars to replace their older models implies things could get worse before they get better.

This piece of a Wall Street Journal article by Mike Colias and Adrienne Roberts highlights that rental company CEOs are getting nervous about the auto market.

Enterprise, one of the leading car-rental firms, reduced its vehicle purchases in the first half of the year compared with 2016, said Kurt Kohler, a senior executive in charge of the rental company’s fleet acquisition. He said signs of declining used-vehicle prices heading into the year prompted Enterprise to narrow its shopping list.

“The market started to move on us, so we pulled back a bit,” Mr. Kohler said. “The car segment already had been declining, but we also saw pricing coming down on SUVs and trucks. That affected how much we wanted to buy.”

Alan Batey, president of GM’s North America region, said an unexpectedly severe downturn in consumer demand for sedans has made it more difficult to ease rental sales, because the rental business would typically help make up the shortfall. “It has tested our commitment” to the strategy, he said, forcing GM to make “tough decisions” to reduce passenger-car production this year, which led to thousands of layoffs at its factories.